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Apple (AAPL), the legendary stock of the past decade, is still one of the most popular stocks in the market. Everybody loves Apple. Under Steve Jobs’ leadership, Apple, which used to be a tiny manufacturer of Macintosh computers turned out to be a gigantic company with a size that is comparable to only ExxonMobil (XOM). Apple awarded its shareholders with a whopping annualized return of 43% over the last 10 years. Compared with the S&P’s (SPY) return of 3%, Apple’s success is remarkable.

After reaching a market cap of above $350 billion, there are concerns about the future of the company. There are claims that Apple is overvalued after making its home run in the last decade. Here, is a brief summary of the bearish arguments:

Steve Jobs is gone. Market cap reached a huge level. Chinese imitators are getting quite professional about replicating Apple products. Competition is tough. Apple fans have high expectations, which may or may not be realized.

I am on the long side of Apple, but these issues stated above are also concerning me as well. Nevertheless, at a trailing ratio of 14, and forward ratio of 9.9, Apple is trading at valuation levels lower than its historical range. The fundamentals look good. Based on a conservative EPS growth estimate of 19%, my fair value range for Apple is $667 - $750. Thus, the stock still has a lot of upside potential.

So, one question that comes to my mind is what is the best time to add more Apple shares to my portfolio? It is quite hard to time the market, but there are periods where we observe market anomalies. I checked for three types of market anomalies from a statistical perspective:

First, I looked at the day of the week to figure out what day is the best day for Apple. Here is what I found:

DAY

Mean Daily Return

Trimmed Mean

Monday

0.15%

0.16%

Tuesday

0.10%

0.06%

Wednesday

0.22%

0.18%

Thursday

0.15%

0.06%

Friday

-0.05%

-0.06%

Average

0.12%

0.08%

Interestingly, Wednesday turned to be the best day to stay long Apple, followed by Monday. On the contrary, Friday, which is traditionally known as the best day of the week, is the worst day for Apple.

(Click charts to expand)

Second, I looked for the days of the month to figure out what days are the best to be long in Apple.

Day of the Month

Mean Return

Trimmed Mean

1

0.46%

0.31%

2

0.18%

0.13%

3

-0.07%

-0.01%

4

0.42%

0.40%

5

0.76%

0.60%

6

0.14%

-0.02%

7

0.10%

0.05%

8

0.10%

0.08%

9

-0.13%

-0.13%

10

0.17%

0.09%

11

0.05%

-0.05%

12

-0.07%

0.00%

13

0.59%

0.42%

14

0.23%

0.18%

15

-0.25%

-0.23%

16

0.12%

0.19%

17

-0.32%

-0.29%

18

0.50%

0.33%

19

-0.41%

-0.35%

20

0.07%

0.03%

21

0.28%

0.18%

22

0.27%

0.14%

23

0.03%

0.01%

24

0.14%

0.12%

25

0.19%

0.19%

26

0.04%

0.00%

27

0.09%

0.04%

28

0.00%

-0.02%

29

-0.19%

-0.08%

30

-0.01%

0.04%

31

0.26%

0.29%

Interesting observations can be derived from the daily performance of Apple. The average daily return of Apple in the last 27 years was 0.12%. The odd-numbered days of 15, 17, and 19 are the worst days to go long Apple. On the contrary, the first week of the month is the best period to gain from Apple. One average, the total capital gain in the first week of the month has been 1.75%, almost three times higher than the weekly average of 0.6%.

Third, I look for the month of the year to figure out what month is the best to buy Apple:

Month

Mean Return

Trimmed Mean

1

8.27%

5.63%

2

2.31%

2.42%

3

5.48%

1.65%

4

5.80%

3.19%

5

1.89%

1.93%

6

-3.14%

-3.07%

7

4.54%

4.07%

8

7.12%

5.26%

9

-5.07%

-1.55%

10

8.24%

5.52%

11

4.28%

3.37%

12

2.04%

1.45%

The statistical analysis of the last 27 years of data suggests that we should not expect a December rally for Apple. However, January looks like the best month of the year with an average return of 8.27%. October has been another good time for Apple shareholders. The average return in October was above 8% for the last 27 years. September and June seem to be the worst months with negative returns.

Summary

I believe Apple is undervalued on a historical basis and it still has a lot of room for expansion. Even if Apple does not come up with a radical innovation such as iPhone, the existing line of products are enough to keep a moderate growth in the cash flow for a long period. Thus, Apple is suitable for the portfolio of any kind of investor. If the trailing P/E ratio falls to single digit levels, even Buffett might get on Apple's board soon.

In this article, I looked at a sample of 6870 observations that spans Apple’s daily price movements between November 30, 2011 and September 7, 1984. Based on a statistical analysis of historical data, the best months to buy Apple are January and October. Wednesday and Monday have traditionally been the best days for Apple. The best days of the month are 1, 4, 5, 13, 18 and 31. Thus, the positive turn-of-the-month effect can be affectively seen on Apple stock.

Market anomalies are still controversial issues in academics, but I believe they exist and short-term traders can benefit from it by timing the market right. However, it is worth stating that past performance is no guarantee of future results. While Apple’s performance was significantly higher in some specific periods, investors should note that there is no magic formula to perfectly time the market.

Source: When Is The Best Time To Buy Apple?